Identifying the sweet spots in technology - investor interest could see the new Treacle Fund close at R300m

Johannesburg, 20 February 2001 - A new R245m private equity and venture capital fund launched this month will focus on technology, media and telecommunication investments which improve businesses' functionality.

Treacle Venture Partners has been established by Christoff Botha, former head of private equity at Gensec Bank, Konrad Fleischhauer, formerly of Archway Venture Partners, and Rudolf Pretorius who was a director at RMB.

Backing the fund is Nedcor and Nedcor Investment Bank with a R200m investment. Hannover Re, Primedia, Decillion and Treacle's management have contributed a further R45m. Botha says interest from other investors could see the fund finally close at R300m.

Management holds 55% in the business, Nedcor has a 25% stake, and Nedcor Investment Bank and Decillion each hold 10%.

Botha said “those who make it in new ventures understand the intricacies of industries.”

As in sport the winners are those who identify the sweet spot, hence the name Treacle.

Despite the disillusionment with technology stocks, Botha believes there will still be opportunities in this area and in making sure SA does not get on the wrong side of the digital divide.

Pretorius sees integration opportunities in areas such as logistics in which billions of Rands will be saved through efficiency.

“We do not think all the bad news about venture capital investments is out of the way. In the US some funds have not yet reported their negative returns,” he said.

“Many of our competitors have already spent a lot of money. In this kind of climate it is going to be difficult to raise money.”

In terms of Treacle Venture Fund's mandate it will not invest more than 15% of the total fund in any one investment. Individual investments will typically be between R10m and R45m.

Botha said “bad deals walk through the door, good deals you have to find”.

This is done by identifying an industry and a management team within that industry which can focus on the sweet spots.

Treacle's focus will be on business-to-business and business-to-consumer, e-commerce, interactive commerce, such as voice, data and video solutions, interactive media such as multimedia services and solutions, and interactive technologies such as wireless, bandwidth and convergence.

Treacle Venture Partners specifically sees opportunities in applying technology to enhance efficiency in the steel, chemical and retail industries.

“We cannot invest in businesses on the expectation we will be able to exit into a buoyant stock market, instead we have to build solid businesses,” Pretorius said.

Botha said: “We are not trying to spread money around but to invest in management teams and concepts which have 90% chance of success.”